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Jurisdiction and consolidation issues at stake for Facebook

When Facebook debuted on the stock market and promptly took a nosedive financially, the business world wondered exactly how NASDAQ, investors and Facebook would all respond. The story continues to unfold, and just yesterday NASDAQ defended its plan to compensate shareholder losses for the technical glitches on its part, which contributed to the botched debut in May.

In related news, business litigation suits have being filed by investors frustrated at Facebook's contribution to their losses. Specifically, investors are alleging that Facebook "selectively disclosed unflattering information about its business prospects to privileged investors," according to the Chicago Tribune.

However, before any of these suits can move forward, issues of jurisdiction and consolidation must be addressed and firmly settled. Whether or not the suits are consolidated and whether the cases will be heard in New York or California will greatly influence the ways in which the suits are approached and ultimately settled.

Though the complaints are likely to be heard in New York, a Judicial Panel on Multidistrict Litigation has yet to definitively rule on the issue. Strong arguments have been advanced that California would be a more suitable venue, given that Facebook headquarters is located near San Francisco and therefore documentary evidence and witness testimony would be easier to locate and process if the cases were heard here.

Then again, if the cases are not consolidated, Facebook could be forced to defend against complaints filed in New York, California, Florida and the District of Columbia. Consolidation can offer benefits to both Facebook and investors, but consolidation is not a guarantee in this case or any other.

Source: Chicago Tribune, "U.S. judges to decide venue for Facebook lawsuits," Tom Hals and Basil Katz, Sep. 19, 2012

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